TaxTMI 
TaxTMI 
2020 (10) TMI 77
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.... 8D(ii) is warranted as the appellant had itself disallowed / added back Rs. 19,15,695/- u/s 14A. [Page 101-115 of CIT(A)'s Order] 2.1 That learned CIT(A) has grossly erred in law and on the facts in confirming the net addition of Rs. 7,69,038/- [i.e. after allowing standard deduction @ 30% on gross addition of Rs. 10,98,626/- which works out to Rs. 3,29,588/-] made by the Assessing Officer on account of notional rent, whereas in fact the appellant has not received any rental income from these tenants. [Page 136-140 CIT(A)'s Order] 2.2 That learned CIT(A) has grossly erred in law and on the facts in not appreciating the fact that the taxable income means real income and not a fictional income. 3. That learned CIT(A) has grossly erred on the facts and in law in confirming the disallowance made by the Assessing Officer to the Rs. 20,42,053/- on account of registration fee for the Gujarat and Karnataka windmills by treating the same as capital in nature. [Page 151-177 of CIT(A)'s Order] 4. That the appellant reserves its right to assail the same on such other ground or grounds as may be advanced at the time of hearing for which the appellant craves leave to amend, vary or ....
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....Rs. 8,87,48,896/- on account of reclassification of income from house property to income from business or profession. 12. The Commissioner of Income T-ax(Appeals) has erred in law and on the facts of the case in deleting the addition of Rs. 6,29,430/- on account of notional rental income on vacant properties. 13. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in deleting the addition of Rs. 5,64,961/- on account of recalculation of depreciation in respect of earlier let out DLF Centre Building, now converted to self occupied property. 14. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in deleting the addition of Rs. 4,75,95,830/- made by the AO on account of disallowance of prior period expenses. 15. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in restricting the disallowance to Rs. 20,42,053/- as against the disallowance of Rs. 735,03,187/- made by the Assessing Officer on account of disallowance of capital expenses. 16. The Commissioner of Income Tax(Appeals) has erred in law and on the facts of the case in deleting th....
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....d and with respect to the addition is confirmed by him, the assessee is aggrieved and therefore both are in appeal before us. 5. Coming to the appeal of the learned assessing officer, the learned departmental representative vehemently supported the order of the learned assessing officer. The learned authorised representative submitted a detailed chart and submitted that except ground number 16 of the appeal all other grounds are covered by the decision of the coordinate bench dated 27th of May 2019 ITA number 2749/del/2013 for assessment year 2008 - 09 in favour of the assessee. He therefore submitted that the coordinate bench order needs to be followed. We have carefully considered the rival arguments and also considered the decision of the coordinate bench for assessment year 2008 - 09 in case of the assessee. We also found that most of the issues are squarely covered by the decision of that assessment year of the coordinate bench. 6. Ground number one of the appeal is with respect to allowing the deduction of Rs. 1 78,61,73,799/- u/s 80 IA B of the income tax act. Both the parties agreed that same is covered by the decision of the coordinate bench in assessee's own case fo....
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.... constructing buildings and sale thereof to Co-Developer is covered by the provisions of section 80- IAB. * As per SEZ Rules, 2006, developer of an SEZ cannot sell land in the Special Economic Zone under rule 11(9). In view of the same, you are required to explain how the sale of buildings can take place without the sale of land. Also explain that how any income arising from such transfer of assets is covered under section 80-IAB and eligible for deduction. * The SEZ Act notifies specified authorized operations which alone qualify for exemptions, deductions. Please explain how sale of constructed buildings can be classified as authorized operations eligible for deduction under section 80-IAB especially with reference to the Notification No. SO/1846(E) dated 27.10.2006 and also with reference to the approval dated 14.02.2007 granted by Government of India, Ministry of Commerce & Industry. * A modified approval dated 01.06.2009 was granted by Board of Approval, SEZ to codeveloper i.e. DLF Assets Ltd. after taking into account the Co-developer agreement dated 20.03.2008. It has been stated in the aforesaid approval that the transactions were approved subject....
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....ovision for claiming the entire deduction of the income in any one year and that also in respect of receipt which actually pertains to a further rent for 49 years. In view of this you may explain why the claim of deduction under section 80IAB, may not be restricted to 1/49th of the total development income received by the assessee company in any one financial year. 50. In light of above observations of the AO, assessee made detail submissions with regard to the specific queries raised by the Assessing Officer which has been noted and dealt by him from paragraph 2.20 to 2.41 of the assessment order. However, ld. Assessing Officer apparently without adverting to the various points and issues raised by the assessee, held that the claim of deduction u/s.80IAB is not allowable predominantly in view of the fact that Hon'ble Punjab and Haryana High Court has held that acquisition of SEZ land was illegal and also the sale of building to a cobuilder is neither a business activity nor one of the authorized operations of SEZ. Accordingly, he denied entire claim of deduction and added the same to the income of the assessee. 51. In the first appeal, Ld. CIT (A) after consi....
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....the Ministry of Commerce in the clarification dated 18.01.2011 and correspondence made between the Ministry of Commerce and Department of Revenue as filed by the appellant during the course of appellate proceedings as additional evidence. In view of the facts discussed above, I agree with the submission of the appellant that the disclaimer condition mentioned in the codeveloper approval letter dated 01.06.2009 is primarily put in by the Board of approvals in the approvals to put a curb on the wrong practices of leasing the land for long periods and receiving onetime payment in the form of lease rental/down payments/premiums etc. which tantamount to sale of land in the guise of long term lease. The appellant has obtained requisite approval from the Board of Approvals by disclosing all facts. The entire controversy as to whether the transfer of bare shell buildings to the co-developer was an authorized operation has been set at rest by the correspondence made between the Ministry of Commerce and Department of Revenue and also by clarification letters issued, dated 18.01.2011 & 20.01.2011 by Ministry of Commerce. I am satisfied that all the conditions as required to be satisf....
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....rvation of the Assessing Officer wherein the Assessing Officer has held that the profit arising from sale of bare shell buildings by the appellant to the codeveloper constitute capital gains and not the business income so as to be eligible for deduction U/s 80 IAB of the Act. Further, the Assessing Officer has held that the sale consideration received for the sale of bare shells had to be spread over the period of 49 years. The appellant has contended without prejudice to the other grounds that if the contentions of the Assessing Officer are accepted that either the appellant was not the lawful owner of the land on which SEZ has been set up or sale of bare shell buildings by the appellant was impermissible then the amount received by the appellant has to be refunded to the co-developer. The appellant has contended that it had been engaged in the business of real estate and the development of such commercial projects is the main object of the appellant. The appellant had been following the Percentage of Completion Method (POCM) for recognizing revenue of various projects as per the Accounting Standards issued by the Institute of Chartered Accountants of India and i....
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.... in disallowing the entire claim of deduction U/s 80 IAB. 8.29 I have considered the submission of the appellant and observation of the Assessing Officer. It is seen that observations of the Assessing Officer are not based on correct appreciation of facts. The appellant has shown work in progress in the business of construction and by no stretch of imagination work in progress can be treated as capital asset. The stock in trade is specifically excluded from the definition of 'Capital Asset' Under section 2(14) of the Act. The development of the bare shell buildings in the SEZ and subsequent transfer thereof cannot be considered as giving rise to short term capital gain considering the business of the appellant and accounting treatment adopted in the books of account irrespective of the treatment by the codeveloper in the books of accounts as fixed assets. The observations of the Assessing Officer on this issue are erroneous, legally untenable and misdirected in holding that the income can be assessed as capital gains. I have gone through the judicial rulings relied upon by the appellant in support to its claim. Further, the appellant has disputed the decision of t....
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....ot an authorized operation or the acquisition of land was illegal then nothing accrues to the appellant and the monies received by it from the co-developer ought to have been refunded. I have considered the submissions of the appellant. Since it has been held that the deduction U/s 80 IAB is admissible to the appellant, this ground becomes infructuous and does not call for any adjudication. 8.30 Ground No.4.2 - This grounds pertains to the observation of the Assessing Officer wherein the Assessing Officer held that without prejudice to the disallowance made U/s 80 IAB, if at any higher appellate stage the assessee is allowed deduction U/s 80 IAB of the IT Act, then the quantum of deduction is to be reduced by Rs. 24,20,98,512/- on the basis of findings given by the Special Auditors in para 3.15 to 3.22 at page Nos.25-29 in Volume-IIIA of the Special Audit Report. The appellant has contended that the Assessing Officer has made these observations on the basis of Special Audit Report wherein the Special Auditors have stated that there is short allocation of overheads to the SEZ Division. The Special Auditors proposed that some expenses ought to have been allocated to the SEZ ....
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..... It is seen that the allocation made by the Assessing Officer from the salary expenses of senior management and expenses under the head 'other expenses' have been made without bringing any adverse information on record. The appellant has given details of headwise expenses incurred on SEZ and non-SEZ activities and such information cannot be brushed aside without pointing out any mistake in the allocation of expenses. The allocation cannot be made on the basis of presumptions and some material has to be brought on record to justify such reallocation of expenses for working out deduction U/s 80 IAB. It is seen that this issue has been considered by me while passing the appellate order dated 19.12.2012 in appeal No.71/12-13 in the case of DLF Commercial Developers Ltd. where the similar disallowance has been directed to be deleted. In view of the factual position, the Assessing Officer is directed to allow the deduction U/s 80 IAB as claimed by the appellant in the return of income without making any reallocation." 52. The Ld. Spl. Counsel appearing on behalf of the Revenue, after referring to the facts as noted in the assessment order, also summarised the ....
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....for sale to DLF Assets Pvt. Ltd (DAPL) were decided by the Memorandum of understanding for Co-developer Agreement, Co- Developer agreements and addendums to Co-developers agreements executed. It is significant to note that the intention here, from the very beginning, was to transfer the entire land and buildings to the co-developer and the assessee company never engaged itself in the business of development of SEZ. Some of these clauses were later amended only with a purpose to show that it might not appear to approving authorities that the intention was to transfer both land and buildings to the codeveloper, particularly when they realized that sale of land in SEZ was not permitted. This fact can be vouched from point 3 of the facts of the case mentioned above. Combined reading of all the clauses of Co-Developer Agreement and Lease deed clearly shows that the intention of the assessee company was to sell land to their related company and they have booked business income out of the transaction. Thereafter the deduction u/s 80-IAB has been claimed out of the business income which should not be allowed for the reason that sale of land is not permitted as per SEZ Act and Rules. ....
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....g of SEZ BOA held on 23rd February 2009 and 19th June 2009, which discussed the assessee company's case as one of the co-developer, are very important and are reproduced as follows: 32nd Meeting "The representative of the DoR (Department of Revenue i.e representative of CBDT) pointed out that the co-development agreement refers to transfer and hand over deeds which states that co-developer shall be the owner of the SEZ buildings on payment of development consideration, which is against the spirit of SEZ Act and Rules. 34th Meeting "The Board noted that in the meeting held on 23.02.2009 it was decided to defer the 4 proposals of co-developers in respect of same Developer, i.e., M/s DLF Limited as the representative of the DoR pointed out that the co-developer agreement refers to transfer and hand over deeds which states that co-developer shall be the owner of the SEZ buildings on payment of development consideration, which is against the spirit of SEZ Act and Rules. Following this observation, the proposals were deferred and it was decided to examine the case on file. DoC examined these proposals on file in consultation with CBDT and the agreements wer....
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.... "That the assessee company has not developed the SEZ rather only constructed the buildings. The deduction u/s 80- IAB is available only in the case of development of SEZ. Mere construction of Bare shell buildings will allow the assessee the deduction u/s 80-IAB. Section 80-IAB states that profit and gains derived from business of developing SEZ. Thus, the deduction is only available once the SEZ is developed and it cannot be allowed before the stage of development of SEZ. b. Sale of buildings to the co-developer is neither an activity of development of SEZ nor one of the authorized operations for SEZ notified by the competent authority. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the Co- Developer agreement and lease deed that the intention on the part of the assessee company, from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. Co-developer agreement and lease deed very clearly shows that the developer has sold the land and building and loses all rights over these transferred capital assets and the relinquis....
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....he assessee on this count has to be treated as capital gains. In this respect the most important aspect to be examined is whether by co-developer agreement entered in the Financial Year 2007- 08, the transfer of the building can be deemed to be transfer for the purpose of taxability. 57. Thereafter, he referred to the provision of Section 2(47)(v) r.w.s. 53A of Transfer of Property Act and submitted that in such cases capital gain should be taxable in the year in which such transaction is entered into even if the transfer of the immovable property is not complete under the general law. He further submitted that in the light of provisions of section 2(47)(v), this issue was examined in great details by AAR Tribunal in the case of Mr. Jasbir Singh Sarkaria (2007) 294 ITR196, it was held that the transaction of the nature referred to in clause (v) of section 2(47) had taken place on a particular date, the actual date of taking physical possession need not be probed into. It is enough if the transferee has by virtue of that transaction a right to enter upon and exercise the acts of possession effectively. It was further held that to attract clause (v) of section 2(47), it is n....
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....e present case, that the developer will have such exclusive possession in his own right only after the entire amount is paid to the owner to the last pie. There is then a possibility of staggering the last installment of a small amount to a distant date may be, when the entire building complex gets ready. Even if some amount, say 10 per cent, remains to be paid and the developer/transferee fails to pay, leading to a dispute between the parties, the right to exclusive and indefeasible possession may be in jeopardy. In this state of affairs, the transaction within the meaning of clause (v) cannot be said to have been effected and the liability to pay capital gains may be indefinitely postponed. True, it may not be profitable for the developer to allow this situation to linger for long as the process of transfer of flats to the prospective purchasers will get delayed. At the same time, the other side of the picture cannot be overlooked. There is a possibility of the owner with the connivance of the transferee postponing the payment of capital gain tax on the ostensible ground that the entire consideration has not been received and some balance is left. The mischief sought to be remedi....
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.... dated 27th October, 2006 issued by the Ministry of Commerce and Industry, Govt, of India. f) As the sale of bare shell buildings to the co-developer, i.e. DLF Commercial Developers Ltd. in accordance with the codeveloper agreement, is against the spirit of SEZ Act & Rules and is not one of the authorized operations of SEZ, the assessee did not derive income from business of developing SEZ. Such isolated transaction of sale of bare shell buildings to the co-developer is nothing but sale of capital assets as the assessee has relinquished all rights over the buildings. Accordingly, the income from sale of bare shell buildings is capital gains on sale of buildings. g) Sale of buildings to the co-developer is not an activity of development of SEZ. It is an isolated transaction giving one time income from transfer of capital assets. It is very clear from the agreement that the intention from the very beginning was to construct and sale the buildings as a onetime activity. Such isolated transaction can never be termed as business activity. CO-developer agreement is very clearly showing that the developer loses all rights over these assets and the relinquishment of right....
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....ion of the words "derived from', a direct nexus between the profits and gains and the industrial undertaking. Copies of the Judgments are enclosed with these submissions." 59. He further referred to the Supreme Court's judgment in the case of Commissioner of Custom vs. Dileep Kumar & Co. (supra) wherein it was held that tax exemption has to be interpreted wherein the benefit of doubt should go in favour of the Revenue and also referred to observations of Their Lordships in paragraph 49 to 52. Thus, he submitted that assessee is not eligible for claim of deduction u/s.80IAB. 60. By way of counter submission, learned counsel for the assessee submitted that the Revenue's counsel has merely reiterated the observations of the Assessing Officer and no new arguments have been taken in respect of claim of deduction u/s.80IAB. He has tabulated the various arguments and point-wise rebuttal of ld. Special counsel in his written submissions. 61. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material referred to before us. The main issue is with regard to allowability of claim of deduction u/s.80....
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....riginal MOU on 23.04.2007. * The authorized operations to be taken up by the codeveloper in the said Silokhera SEZ was also approved by the Ministry of Commerce & Industry (SEZ Section) vide letter dated 22.05.2007 which included development of office space also (Warm Shell). * In order to consolidate the MOU and addendums thereto a co-developer agreement was entered into between the assessee and DLF Assets Pvt. Ltd. on 20.03.2008 which was also filed before the Board of approvals and the approval was also granted to this agreement vide letter dated 01.06.2009 by the Ministry of Commerce & Industry (SEZ Section). 62. The case of the Assessing Officer for making the disallowance on various counts can be summarized in the following manner: - A. The ownership of land on which SEZ has been developed is in dispute in view of the decision of Punjab & Haryana High Court and as such the claim of deduction is inadmissible in absence existence of SEZ project. B. Transfer of building cannot be considered as activity of development of SEZ and as such the profit arising from such transfer is not eligible for deduction u/s 80IAB. The activity of devel....
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....d that where in computing the total income of any undertaking, being a Developer for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (13) of section 80-IA, the undertaking being the Developer shall be entitled to deduction referred to in this section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in subsection (1) or sub-section (2), as the case may be: Provided further that in a case where an undertaking, being a Developer who develops a Special Economic Zone on or after the 1st day of April, 2005 and transfers the operation and maintenance of such Special Economic Zone to another Developer (hereafter in this section referred to as the transferee Developer), the deduction under sub-section (1) shall be allowed to such transferee Developer for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee Developer. (3) The provisions of sub-section (5) and sub-sections (7) to (12) of section 80-IA shall apply to the Special Economic ....
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.... Co-developer can acquire / purchase building on the leased land to perform approved operations. Moreover, the transaction envisaged in the MOU and agreement with M/s. DLF Assets P. Ltd. has been specifically approved in reply to Query No.6 & 7 of the said letter. This position was once again clarified in reply dated 20/01/2011. vii. The BOA also sought clarification from CBDT regarding activity proposed to be carried out by the assessee and co-developer and CBDT duly approved by the same vide letter dated 01.06.2009 with disclaimer that Income Tax Department shall have right to examine the taxability of transaction involving lease of land. 66. One of the main reasons for denying the claim of benefit u/s.80IAB by the Assessing Officer was that the ownership of land on which SEZ has been developed is in dispute in view of decision of Hon'ble Punjab and Haryana High Court, and therefore, such a claim is inadmissible. In this connection, learned counsel before us has clarified that assessee was a bona fide purchaser of the property in respect of which approval for development of SEZ project was duly granted by Government of India. In any case, the Hon'ble P&H Hig....
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....series of approvals from 'Board of Approval', which is a body authorised by the statute and by the Govt. of India. Assessing Officer has mainly considered/examined the issue of disallowance of claim of deduction on the ground that activity of developing of building and subsequent transfer of bare shell to co-developer is not the authorized operation under SEZ Act. As stated above, before undertaking the activity of development of SEZ, the assessee has obtained approvals from time to time so as to comply strictly within the provisions of SEZ Act r.w.s. 80IAB of I.T. Act. The Board has granted approval not only to the assessee for building the bare shell but also to the co-developer after examining the various clauses of MOUs dated 29.01.2007 and 20.03.2008, wherein particulars of development activity are extensively laid down. The provision of Section 80IAB mandates that assessee must be a developer under the SEZ Act and income must be derived from business of developing SEZ notified under the SEZ Act, 2005. Here in this case, all the conditions stood satisfied and Assessing Officer has also not pointed out as to which of the conditions have not been fulfilled. Likewise, in....
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....est by BOA. Hence, the allegations of the Assessing Officer are totally misconceived and are rejected. 70. The ld. CIT(A) vide his finding recorded in paragraph 8.17 to 8.27 had specifically referred to the minutes of BOA meets as well as comments obtained from CBDT with regard to the lease of land. The Director CBDT vide letter dated 26.05.2009 has conveyed its approval for the project under consideration with the right to examine the taxability of income arising from such transaction under the Income Tax Act. The BOA only after considering the reply from the CBDT, granted the approval vide letter dated 01.06.2009 to Codeveloper, M/s. DLF Assets P. Ltd. on definitive agreement dated 20.03.2008 after inserting clause (xvii) of Para 3, wherein it was clarified that approval to lease agreement will not have any bearing on treatment of income by way of lease /rental/down payment/premium etc. under the Income tax Act, 1961. It was specifically pointed out by the Ld. Counsel that there was nothing in the minutes of meetings of Board of Approval held on 23.02.2009 and 19.06.2009, indicating that there was any objection with regard to proposed transfer of bare shells by the asses....
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....y to the provisions of the SEZ Act, which has an overriding effect. In the garb of disclaimer, the AO cannot usurp the functions of the Board of Approval and sit over the judgement on what constitutes an authorized operation within the meaning of SEZ Act/SEZ Rules. Merely because a deduction is allowed to transferee developer in respect of profits derived from operation and maintenance would not lead to inference that the deduction for development of a SEZ would not be available to the developer. The mandate of Section 80IAB is that a developer is entitled to deduction in respect of "profits and gains" derived from "any business of developing a Special Economic Zone" and for what constitutes 'developing a Special Economic Zone', one has to refer to the provisions of the SEZ Act. When the assessee has been granted approval as a Developer and all the authorized operation were approved including transfer of bare shells to the Co-developer for a development consideration by the Board of Approval, the business activity carried out by the assessee pursuant to such approvals constitute business of 'Developing a Special Economic Zone' within the meaning of Section 80IAB of the Act. Under s....
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....ofits derived from business of development, operation and maintenance of a SEZ has to be taken from such activity and consequently is entitled for claim of deduction u/s.80IAB. 74. Thus, in view of our reasoning given above, we hold that Assessing Officer was not justified in denying the benefit of deduction u/s.80IAB arising from sale of bare shell building to co-developer. 75. Before us, learned counsel for the assessee has also pointed out that in a group concern, this Tribunal in the case of DLF Info City Developer (Chennai) Ltd. and M/s. DLF Cyber City Developers Ltd. on identical circumstances and similar reasoning given by the AO has allowed the claim of deduction u/s.80IAB. The copy of these judgments has been placed before us in paper books. 76. From the perusal of the aforesaid, we find that precisely same reasoning were given by the Assessing Officer in these cases wherein the Tribunal after analyzing the provision of SEZ Act, 2005 and on exactly similar set of activities have held that assessee is eligible for deduction u/s.80IAB because they were in consonance not only under the SEZ but also BOA has approved such activities. 77. The ....
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....erms of section 2(13) of the Income tax Act, 1961. Thus, re-characterising the income as short-term capital gain by the AO is rejected. 78. Coming to another alternative finding of the ld. Assessing Officer that, since the land has been leased for 49 years, therefore, the income from sale of bare shell building should also be bifurcated and proportionate recognized over a period of 49 years. We find that the Ld. CIT (A) has discussed this issue in detail and has held that the lease is only in respect of land and same cannot be applied on transfer of building. In any case, the recognition of revenue relating to real estate projects is governed by AS-7 and the assessee has been consistently following POCM which has accepted by the Tribunal in assessee's own case for AY 2006-07. Hence, such a reasoning of the AO to disallow proportionate deduction cannot be sustained. 79. Thus, in view of our finding given above, the order of the ld. CIT (A) in allowing the claim of benefit u/s.80IAB is confirmed and consequently the ground raised by the Revenue is dismissed. 80. Lastly, in so far as the reliance placed by the Ld. Spl. Counsel for the revenue that t....
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....ions of the Special Auditors, the Assessing Officer required the assessee as to why the expenditure of Rs. 15,02,99,365/- benefit of which has accrued to the group entities like, DLF Infocity developers (Chennai Limited) and DLF Cyber City Developers Ltd. be apportioned to them and correspondingly the same should be disallowed in the hands of the assessee. In response, the assessee has submitted the detail reply and submitted that if income expenditure has been incurred on behalf of company, the same have been duly recovered from those companies specifically and assessee has not debited to the P&L account. For the specific expenses which were debited to the concern group companies there is no expenditure which pertains to other group companies and all the expenses debited in the P&L account are related to the business of the assessee. Even the Special auditors have not been pointed out even a single voucher pertaining to other group company which has been wrongly debited to the P & L account of the assessee. Regarding overhead allocation the assessee has submitted as under: a. That the assessee company has not developed the SEZ rather only constructed the buildings. The de....
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....ute and as per the amended agreement and lease deed, Co-developer shall be treated as owner of the bare shell building and the warm shell building after additions etc and will have exclusive rights to let, mortgage, or allow use of all or any part of buildings. e. That if the deduction u/s 80-IAB is allowed to the assessee company in this case and the Co-developer does not develop the SEZ later on , how can we say that the SEZ has been developed and why should the deduction be allowed to the assessee company at this stage where the development of SEZ has not been done . Allowing the deduction at the stage of construction of bare shell building would be against the provisions of SEZ and Income Tax Act. 127. Ld. Assessing Officer after considering the assessee's reply had observed as under: "12.5 The reply of the assessee has been considered and from the reply it emerges that the assessee has stated that it is a listed company and not incurred any expenditure on behalf of its associated companies. The assessee company has argued that in case of both the companies to which the expenses have been allocated the main project undertaken by the two companies is d....
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....d any incidental benefit arising to a third party out of such expenditure cannot be made basis for disallowing the same. These citations are not relevant in the present case since the expenses incurred by the assessee have benefitted the associated companies of the assessee who are in similar line of business as that of the assessee and in the past also the assessee itself had allocated certain expenditure to its associated companies. The assessee has also mentioned certain citations regarding business expediency and stated that the expenses must be incidental to the business of the assessee. The question here is that the expenses incurred by the assessee have benefitted the associated concerns and therefore the same are to be apportioned to the associated concerns. The associated concerns during the year have developed SEZ and the assessee company during the year had also earned income from development of SEZ but there is substantial variance in the level of expenses incurred and accordingly some expenses are to be attributable for the benefit of associated concerns since there is similar line of business. The associated concerns has claimed 100% deduction u/s 80IAB and therefore ....
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....ture incurred by the two associated concerns as compared to the assessee company considering the similar line of business. 12.10 In view of the same it can be inferred that a part of overhead expenses relatable to the two entities stand in the books of the assessee. Since the benefit of such expenditure does not accrue to the assessee but to the two group entities also, the expenditure of Rs. 15,02,99,365/- as worked out by the special auditors is disallowed." 128. Ld. CIT(A) has deleted the addition in the following manner: "19.22 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, order of the CIT (A)-XVIII for the A.Y. 2006-07 and my own order for A.Y. 2007- 08 wherein this issue has been decided in favour of the appellant, and various case laws relied upon by the appellant on this issue. It is seen that appellant company was allocating over head expenses to its associate companies till October 2006. However, after October 2006, the appellant company stopped allocating overhead expenses to its group companies and transferred the concerned staff, who were previously looking after the affairs of group entities, to the....
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....considered for POCM. The details of such expenditure was furnished to the Assessing Officer at page No.2 of appellant's letter dated 31.3.2011. The total cost of the overhead expenditure forming part of development cost is Rs. 9,73,06,213/-. This expenditure includes the overhead expenses incurred by the DLF Cybercity Developer Ltd. 19.23 Hence, it is clear that no benefit has accrued to group companies namely DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd from the expenses of Rs. 150,299,365/-, as these expenses were exclusively for the business of the appellant company. There was no justification for disallowing these expenses. The ASSESSING OFFICER as well as Special Auditors have not brought any material on record which can prove that expenditure debited in the P&L account of the appellant company was not incurred for the bonafide business needs of the appellant company. The appellant company is main group company and expenditure incurred in this company are bound to be higher and in the process of incurring such expenditure if other group companies derived some benefit from such expenses, the expenditure cannot be allocated to the companies ....
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....protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders' activity. Furthermore, the advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all pertaining to the business of the company. No evidence / instances have been cited by AO that any of this expenditure has not been incurred by the company and they are not related to the business of the assessee. It may happen that by incurring certain expenditure by the assessee for the purpose of his business may result into some indirect benefit to the group companies but that cannot be the ground for disallowance of that expenditure in the hands of the assessee. The CIT (A) relying upon the decision of ITAT, Delhi Bench in the case of Nestle India Ltd. vs. DICT - 27 SOT 9 has deleted the addition. We do not find any infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with instances that these are not incurred by the assessee wholly and exclusively for the purposes of the business of the assessee. Hence, we confirm the order of the CIT (A) deleting the addi....
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.... (iii) Title to land or other rights to development/ construction. (iv) Change in land use (b) When the stage of completion of the project reaches a reasonable level of development. A reasonable level of development is not achieved if the expenditure incurred on construction and development costs is less than 25 % of the construction and development costs as defined in paragraph 2.2 (c) read with paragraphs 2.3 to 2.5. (c) At least 25% of the saleable project area is secured by contracts or agreements with buyers. (d) At least 10 % of the total revenue as per the agreements of sale or any other legally enforceable documents are realised at the reporting date in respect of each of the contracts and it is reasonable to expect that the parties to such contracts will comply with the payment terms as defined in the contracts. To illustrate - If there are 10 Agreements of sale and 10 % of gross amount is realised in case of 8 agreements, revenue can be recognised with respect to these 8 agreements." According to the above guidance note the revenue of the project can be recognised only when the above conditions specified therein. Accordi....
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....atisfied that issue is revenue neutral the matter may be set at rest. Therefore, ground no.8 of the appeal is allowed with above direction." 87. Thus, following the earlier year precedence, we decide the issue in favour of the assessee and revenue's appeal is consequently, dismissed." In absence of any contrary decision pointed out before us, we find that issue squarely covered by the decision of the coordinate bench. Accordingly the order of the learned CIT - capital is confirmed in ground number three of the appeal is dismissed. 10. Ground number four of the appeal is against the deletion of the addition on account of capitalization of interest. Both the parties confirm that this issue is also covered against the revenue by the order of the coordinate bench as per paragraph number 97 - 98 of the decision of the coordinate bench wherein the coordinate bench has decided this issue for assessment year 2008 - 09 following the order of the coordinate bench in assessee's own case for assessment year 2006 - 07 as Under:- "97. This issue too has been decided in favour of the assessee after detailed discussion by the Tribunal and the relevant observatio....
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....he capital asset was borrowed for acquisition of the asset till the date on which such asset was put to use shall not be allowed as deduction. The deduction is to be disallowed even if the interest is capitalized in the books of accounts or not. Hon'ble Supreme Court in the case of Core Healthcare [298 ITR 194] has held that provisions of section 36(1)(iii) is a code in itself. In the present case, the interest paid by the assessee is not for the purpose of acquisition of any capital asset but for its inventory. We do not find any restriction in provisions contained u/s 36(1)(iii) which provides that the interest can be disallowed if incurred for the purpose of inventory as provided under Accounting Standard 16. Apparently, in this case, there is no allegation that interest is not paid on capital borrowed for the purpose of the business. Hon'ble Mumbai High Court in the case of CIT vs. Lokhandwala Constructions Industries Ltd. [ 131 taxman 810] has held as under :- "4. From the facts found by the Tribunal on record, it is clear that assessee undertook two-fold activities. It bought and sold flats. Secondly, the assessee was also engaged in the business of construc....
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....assessee had to show was that the capital which was borrowed was used for business purpose in the relevant year of account and it did not matter whether the capital was borrowed in order to acquire a revenue asset or a capital asset. The said judgment of the Bombay High Court applies to the facts of this case." Further, in the following decisions of various coordinate Benches, the deduction of interest has been allowed u/s 36(1)(iii) even where the assesse has followed the projection completion method :- (i) ACIT vs. Tata Housing Development Company Ltd. - 45 SOT 9 (Bom.); (ii) DCIT vs. Thakar Developers - 115 TTJ 841 (Pune); (iii) DCIT vs. K. Raheja Pvt. Ltd. - (2006) TIOL 220 ITAT-MUM.; (iv) K. Raheja Development Corporation vs. DCIT in ITA No.240/Bang./97 dated 22.09.1997 - In this case, reference application filed by the Department has also been rejected by the Hon'ble Karnataka High Court vide its order dated 08.11.2000 in Civil Petition No.832/2000 (IT). Before us, ld. DR could not cite any decision against the claim of the assesse, therefore, respectfully following the decision of Hon'ble Bombay High Court and as well as ....
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....rage and commission of Rs. 2,99,74,610/-. 100. Ld. Assessing Officer on the basis of comments of Special Auditors observed that certain expenses such as brokerage and commission are being claimed in the P&L account while the matching revenues are not credited to the P&L account. He has discussed in detail various observations and note of the Special Auditors and observed that assessee's reliance on accounting standard-7 is not misplaced as it applies to construction contract and not to development project undertaken by the assessee himself. Further, the reliance placed by the assessee upon the order of the ld. CIT(A) for the Assessment Year 1983-84 is also misplaced as accounting policy is followed for recognition of revenue in Assessment Year 1983-84 is to be from the accounting policy followed for the year under assessment. The assessee has not paid this brokerage as a selling cost for procuring any construction contract. He has paid this money for selling of this various project even before the construction project was started. He further held liability of expenditure for the purpose of determining the taxable income is determined by the Income Tax Act and not by the ac....
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....ssue has been decided in favour of the appellant by Hon'ble ITAT in its order for A.Y. 1984-85. However, the ASSESSING OFFICER has observed that the accounting policy followed by the appellant company for recognition of revenue in the A.Y. 1983-84 were different from the accounting policy followed during the year under consideration. It is seen that in A.Y. 1983-84 also the selling cost i.e. brokerage and commission were claimed in the year in which they are incurred and same were not recognized on the basis of revenue recognition. Therefore, the ratio of the said judgment is still applicable in the case of appellant and the brokerage and commission has to be allowed in the year in which they are incurred and cannot be associated with construction cost. The contention of the ASSESSING OFFICER that the brokerage expenditure to be postponed to subsequent year as per AS-9 cannot be accepted, as brokerage and commission are related to the sale of flats and properties. By incurring the same the appellant has not derived any enduring advantage in subsequent years. The ASSESSING OFFICER has relied upon the Supreme Court judgment in the case of Madras Industrial Investment Corp. 2....
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.... deduction of brokerage paid for giving the property on rent, therefore, the expenditure incurred by the appellant of Rs. 64,51,161/-( for Grand Mall Rs. 3,65,378/- + town square mall Rs. 60,85,783/-) is not an allowable expenditure. In the result, this ground of appeal is partly allowed and appellant gets a relief of Rs. 2,99,74,600/-." 102. Again, this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for Assessment Year 2006-07 in the following manner: "69. We have carefully considered the rival contentions. We have also perused the order of ITAT in assessee's own case for AY 1984-85 submitted before us by the ld. AR. This decision has also been considered by the AO at page 188 of the assessment order. The AO has not followed this decision as it could not be verified whether the issue has been taken up by the department before the Hon'ble Delhi High Court or not. Before us, ld. DR also could not point out that why this decision cannot be followed nor we could find any reason for not following the same by AO except that whether it is accepted by the department or not is not verified. Ld. CIT (A) has also deleted the....
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....ency deposit received at Rs. 1,14,837/-. Ld. Assessing Officer observed that the deposits have been received from the customers as part of total sale price to meet out various contingency expenses and this amount has neither paid back to the customers nor was intended to be paid back. Accordingly, he treated the amount of Rs. 1,14,837/- as income of the assessee. 109. Ld. CIT(A) has deleted the addition in the following manner: "15.6 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, orders of the CIT(Appeals) for the Assessment Years 2006-07 and 2007-08, which are in favour of the appellant, and the other material available on record. It is seen that these contingency deposits were received from the customers at the time of sale or agreement to sale of plot/flat to meet out the future liability which may arise on account of enhancement of compensation to the land owners or any demand from Govt. of Haryana on account of development or providing external services to the plot/flat holders. Therefore, such deposits were kept in a separate account and shown under the head 'liability'. These receipts are not trading receipts of the....
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.... have been received during the year, it is also not the case that the payers or the depositors are unidentified and it is not the case of the AO that these amounts have been paid by the buyers without any obligation on the assessee to perform by providing the services. In view of this, we confirm the order of CIT (A) in deleting the addition of Rs. 4,94,00,550/-. on account of security deposits. In the result, the ground no.27 of the revenue's appeal is dismissed." 111. Accordingly, following the same precedence this issue is decided in favour of the assessee." Therefore, respectfully following the decision of the coordinate bench we dismiss ground number six of the appeal and confirm the order of the learned CIT - A. 13. Ground number seven is with respect to the disallowance of addition on account of net interest free security deposit placed deleted by the learned CIT - A. Both the parties confirm that this issue is covered in favour of the assessee by the order of the coordinate bench in assessee's own case for assessment year 2008 - 09 wherein coordinate bench followed the decision of the coordinate bench in assessee's own case for assessment year 2006 - 07 and r....
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....ddition made by the ASSESSING OFFICER on account of interest free deposits is deleted. The reliance in this regard is placed to the decision of jurisdictional high court in the case of CIT vs. Goyal Gases Pvt. Ltd. ( Supra), wherein security deposits received by the said company were not held as revenue receipt." 114. The Tribunal also in Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: "240. We have carefully considered the rival contentions. It is a fact that these deposits are received in terms of sale agreement for customers as security deposit till the formation of condominium and society. These deposits are taken as a safeguard to defray the maintenance expenditure of the society and to keep these deposits for insurance premium and maintenance. They are refundable to resident welfare associations. CIT (A) relying on the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Goel Gases Pvt. Ltd. - 188 ITR 216 (Del.) held that security deposit cannot be charged to tax as an income. In view of this, we do not find any infirmity in the order of the CIT (A) when deposits are with a purpose, th....
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.... liability in the balance-sheet and this method has been consistently followed by the assessee in the earlier assessment years. However, the ld. Assessing Officer held that these are not correct fact because similarly additions have been made in the Assessment Years 2006-07 and 2007-08 by the Assessing Officer. The Assessing Officer has also accompanied the assessee company has furnished company-wise, property wise of the persons from whom registration charges were received during the financial year 2007-08 which cannot contains the subsequent dates of payment of registration charges till 31.12.2010. From these details, Assessing Officer held that it is difficult to assessed the amount spent up to the period ending 31.02.2010 which corresponding to the amount received in the financial year 2007-08 and whether the amount of Rs. 8,49,20,884/- received in the year was actually spend till 31.12.12010 assessee has also not given proof of deposit of registration charges and has only enclosed the list. He thus concluded assessee has not utilized the amount received in account for more than two years, and therefore, it is in the nature of income and assessee may claim the expenditure again....
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....ssessment Year 2007-08 has dismissed the Revenue's appeal after observing and holding as under: "244. We have carefully considered the rival contentions. It is noted that this is the amount which is collected by the buyers with specific object of getting exclusion of conveyance deed in favour of the buyer. In fact, it is an advance collected by the assessee from the buyer towards registration charges with the office of the Registrar for conveyance deed registration. At the time of registration, assessee incurs this expenditure by debiting to this account of that particular customer. The total receipt of registration charges is identified with respect to each of the buyer and there are movement in respective accounts. In fact, it is a past through cost collected by the assessee from the buyer to be incurred by assessee on behalf of the buyer. In view of these facts, these receipts cannot partake character of the revenue in the hands of the assessee. It is also not the case of the AO that the depositors are not identified and despite the conveyance deed executed by the assessee, the amount has not been incurred. In absence of this finding, it is no....
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....gard to apportionment of common overhead expenses incurred by the assessee company but attributable to group concern were benefitting from such expenditure. Based on the observations of the Special Auditors, the Assessing Officer required the assessee as to why the expenditure of Rs. 15,02,99,365/- benefit of which has accrued to the group entities like, DLF Infocity developers (Chennai Limited) and DLF Cyber City Developers Ltd. be apportioned to them and correspondingly the same should be disallowed in the hands of the assessee. In response, the assessee has submitted the detail reply and submitted that if income expenditure has been incurred on behalf of company, the same have been duly recovered from those companies specifically and assessee has not debited to the P&L account. For the specific expenses which were debited to the concern group companies there is no expenditure which pertains to other group companies and all the expenses debited in the P&L account are related to the business of the assessee. Even the Special auditors have not been pointed out even a single voucher pertaining to other group company which has been wrongly debited to the P & L account of the assessee....
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.... Relevant paras of Lease deed are at page 135 & 136 of the Paper Book II filed by the Counsel of the assessee. d. The transfer of building is absolute and as per the amended agreement and lease deed, Co-developer shall be treated as owner of the bare shell building and the warm shell building after additions etc and will have exclusive rights to let, mortgage, or allow use of all or any part of buildings. e. That if the deduction u/s 80-IAB is allowed to the assessee company in this case and the Co-developer does not develop the SEZ later on , how can we say that the SEZ has been developed and why should the deduction be allowed to the assessee company at this stage where the development of SEZ has not been done . Allowing the deduction at the stage of construction of bare shell building would be against the provisions of SEZ and Income Tax Act. 127. Ld. Assessing Officer after considering the assessee's reply had observed as under: "12.5 The reply of the assessee has been considered and from the reply it emerges that the assessee has stated that it is a listed company and not incurred any expenditure on behalf of its associated companies. Th....
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....ocumentary evidence. 12.8 The assessee has relied on certain citations wherein it has been held that expenses incurred for business requirement are allowable and any incidental benefit arising to a third party out of such expenditure cannot be made basis for disallowing the same. These citations are not relevant in the present case since the expenses incurred by the assessee have benefitted the associated companies of the assessee who are in similar line of business as that of the assessee and in the past also the assessee itself had allocated certain expenditure to its associated companies. The assessee has also mentioned certain citations regarding business expediency and stated that the expenses must be incidental to the business of the assessee. The question here is that the expenses incurred by the assessee have benefitted the associated concerns and therefore the same are to be apportioned to the associated concerns. The associated concerns during the year have developed SEZ and the assessee company during the year had also earned income from development of SEZ but there is substantial variance in the level of expenses incurred and accordingly some expenses are to be....
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....nd had not benefitted the associated concerns. The assessee has not been able to convincingly explain the extremely low level of administrative overhead expenditure incurred by the two associated concerns as compared to the assessee company considering the similar line of business. 12.10 In view of the same it can be inferred that a part of overhead expenses relatable to the two entities stand in the books of the assessee. Since the benefit of such expenditure does not accrue to the assessee but to the two group entities also, the expenditure of Rs. 15,02,99,365/- as worked out by the special auditors is disallowed." 128. Ld. CIT(A) has deleted the addition in the following manner: "19.22 I have considered the submission of the appellant, observation of the ASSESSING OFFICER, order of the CIT (A)-XVIII for the A.Y. 2006-07 and my own order for A.Y. 2007-08 wherein this issue has been decided in favour of the appellant, and various case laws relied upon by the appellant on this issue. It is seen that appellant company was allocating over head expenses to its associate companies till October 2006. However, after October 2006, the appellant company stopped a....
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....o further allocation is required. Apart from the above, the company had incurred overhead expenditure which formed part of the development cost which has been considered for POCM. The details of such expenditure was furnished to the Assessing Officer at page No.2 of appellant's letter dated 31.3.2011. The total cost of the overhead expenditure forming part of development cost is Rs. 9,73,06,213/-. This expenditure includes the overhead expenses incurred by the DLF Cybercity Developer Ltd. 19.23 Hence, it is clear that no benefit has accrued to group companies namely DLF Info City Developers (Chennai) Ltd. and DLF Cyber City Developers Ltd from the expenses of Rs. 150,299,365/-, as these expenses were exclusively for the business of the appellant company. There was no justification for disallowing these expenses. The ASSESSING OFFICER as well as Special Auditors have not brought any material on record which can prove that expenditure debited in the P&L account of the appellant company was not incurred for the bonafide business needs of the appellant company. The appellant company is main group company and expenditure incurred in this company are bound to b....
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....at the director's salary is being paid to the directors of the company including a commission thereof is for the purpose of managing the business of the DLF - assessee. Further, for the protection of the interest of the company even if the directors have given their time for looking after other group activities it is merely a shareholders' activity. Furthermore, the advertisements, salary and wages, leave encashment expenditure and printing expenses etc. are all pertaining to the business of the company. No evidence / instances have been cited by AO that any of this expenditure has not been incurred by the company and they are not related to the business of the assessee. It may happen that by incurring certain expenditure by the assessee for the purpose of his business may result into some indirect benefit to the group companies but that cannot be the ground for disallowance of that expenditure in the hands of the assessee. The CIT (A) relying upon the decision of ITAT, Delhi Bench in the case of Nestle India Ltd. vs. DICT - 27 SOT 9 has deleted the addition. We do not find any infirmity in the order of the CIT (A) and revenue could not controvert the fact of any expenditure with i....
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.... expenditure shown by the assessee is not correct. The employees could not have worked in vacuum and definitely the assessee has borne some cost on account of infrastructure and facilities of the assessee used by these employees. Moreover the participation of senior functionaries in the decision making with regard to the investment in exempt income cannot further be ruled out. Therefore the learned assessing officer not satisfied with the correctness of the claim of the assessee and invokes the provisions of rule 8D to make further disallowance u/s 14 A of the income tax act. The learned authorised representative submitted that there is no satisfaction recorded by the learned assessing officer that how the claim of the assessee is incorrect with respect to the accounts of the assessee. It was further stated that the learned assessing officer has made a general remark and could not point out about the correctness or otherwise of the disallowance made by assessee. The assessee has also supported this argument with several judgments of the various courts and tribunals to submit that according to the provisions of Section 14 A (2) of the act the learned assessing officer should have....
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....dded back. This is not sufficient as per the law. Once this mandatory requirement is itself not fulfilled, in terms of the law explained by this Court in Maxopp Investment Ltd. v. CIT [2012] 347 ITR 272/[2011] 203 Taxman 364/15 taxmann.com 390 (Delhi), the question of remanding the matter to the CIT (A) and to call for a remand report from the AO for the purposes of rectifying this jurisdictional defect simply did not arise. In this context, the Court also notices that in the order passed by the AO on 28/30th December 2016 pursuant to the impugned order of the ITAT on remand, the AO had simply repeated his entire assessment order passed in the first instance. Be that as it may, the Court is of the view that the ITAT erred in overlooking the correct legal position in remanding the matter to CIT (A). 14. Accordingly, both the questions are answered in favour of the Assessee and against the Revenue. The impugned order of the ITAT and the consequential order of the AO dated 28/30th December 2016 are hereby set aside but without any order as to costs." Therefore respectfully following the decision of Honourable Delhi High Court, we direct the learned assessing officer to del....
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....years relevant to AY 2006-07 & 2007-08 in appellant's own case, the income received from the properties owned by the appellant and shown in the balance sheet has to be assessed as income from house property. Therefore, the ASSESSING OFFICER is directed to treat the income from such properties as income from "house property" and allow deduction u/s 24(a) of the IT Act. Hence, the addition made by the ASSESSING OFFICER of Rs. 9,40,52,455/- is deleted." 159. The Tribunal in assessee's own case for Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: "184. Further, Ld. DR has relied upon the decision of Hon'ble Supreme Court in the case of Chennai Properties and Investment Ltd. vs. CIT in Civil Appeal No.4494/2004 wherein Hon'ble Supreme Court has held that letting out of the properties is in fact the business of the assessee. We have gone through the decision of Hon'ble Supreme Court and we are of the view that this decision favours the argument of the assessee. At page 4 of the decision, the Hon'ble Supreme Court has considered the judgement of that court in East India Housing and Land Trust Ltd. The court has con....
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.... decided in favour of appellant. It is seen that impugned addition made on account of notional rent on properties that remained vacant for part of the previous year, the AR reiterated submissions made before the AO and emphasized that the matter is covered in favour of the appellant by judgment in the case of one of the appellant's group concerns M/s DLF Office Developers Vs. ACIT reported in 23 SOT 19 (Del) and orders of CIT (Appeals) in appellant's own case for the Assessment years 2006-07 and 2007- 08. It is observed that" where there was an intention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value will have to be worked out under section 23(1)(c) of the IT Act and according to this clause, if the actual rent received /receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property." In the case of appellant, the appellant had intention to let such properties but could not get suitable tenant. In such a situation, the ALV will be Nil as per provision of section 23(1)(c) of the IT Act. Section 23(1)(a) r.w.s 23(1)(c) c....
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....ntention to let out the house property and assessee took steps to let it but could not get suitable tenant, in such cases the annual value have to be worked out u/s 23(1) (c) of the IT Act and according to this clause if the actual rent received/ receivable during the year is Nil then that has to be taken as annual value of the property in order to compute the income from property. He has accordingly held that in case of the assessee where the property remained vacant then the ALV of such property will be Nil. Hence, no notional rent can be estimated in the case of vacant properties. 21. In absence of rebuttal of above aspect of the facts in the case of present assessee, we are of the view, that the Ld. CIT (A) has rightly decided the issue in favour of the assessee taking assistance of the cited decisions before him. We find that the Ld. CIT (A) has discussed the issue in appeal and has passed a speaking order, which is being reproduced hereunder: 7.15 I have considered the submission of the appellant, observation of the ASSESSING OFFICER and various judicial pronouncements available on the issue and order of Commissioner of Income Tax (Appeals)-XVIII for AY 2006....
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....sing Officer. It is not the case that appellant has received some under hand rent from the tenants. In this regard the Assessing Officer has not brought any evidence on record and no enquiry in this direction was conducted by him. Therefore, assuming the rent for all properties based on the highest lease agreement was not justifiable. As regards Assessing Officer's reliance on various judgments in the assessment order, it is seen that the facts of the said judgments are squarely different with that of the appellant's case. In the case of appellant, none of the properties have been rented out/leased to the related parties. Therefore, the ratio of the said judgment cannot be applied in the appellant case. In view of the above, the bonafide lease agreement between the appellant and third parties cannot be disregarded without having any adverse information in this regard and based on conjectures and surmises. Hence, the addition made by the Assessing Officer on this issued is deleted. Facts of the above cited judicial pronouncements are identical with the facts of the appellant's case. Therefore, ratio of the said judgment is squarely applicable to the facts of the appellant's....
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....r for AY 2007-08 in appellant's case, where this issue was decided in favour of the appellant company. It is seen that the AO has recalculated written down value as on 01.04.2005 by notionally deducting depreciation from the WDV as on 01.04.1999. The amount of notional depreciation for the period 01.04.1999 01.04.2005 during which period the property had been leased and the income taxed under the head "Income from House Property" after allowing deductions permissible under Section 24 of the Income Tax Act. Deductions by way of depreciation allowance are dealt in section 32 of the Income Tax Act which provides for allowing depreciation on the basis of Written Down Value of the assets under section 32(1)(ii). The definition of the word written down value is in section 43(6)(b) of the Income Tax Act which provides that in the case of assets acquired before the previous year written down value means the actual cost to the appellant less all depreciation actually allowed under the Act. From the facts and the judgment of Hon'ble Supreme Court in the case of CIT vs. Doomdooma India Limited (2009) 178 Taxman 261 (SC), it is clear that the depreciation is to be allowed on the basis....
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.... Rs. 14,63,017/- was on account of purchase of assets being the cost of office equipment and computers and was never claimed as admissible expenses but have been capitalized as fixed assets. The balance amount was stated to be on account of reimbursement to their employees on account of telephone expenses, travelling, printing and stationary and these are reimbursed if the employees submit the claims after proper verification. The claim though relates to earlier years, but bills were presented and settled during the year under reference, therefore, the same is allowable in this year. Similarly, with regard to legal and professional charges which was paid to various consultants, these payments were made after due verification of the services rendered and the claim was finally settled during the year, hence, allowable in this year only. Likewise, repair and maintenance expenses, the same was on account of annual maintenance, contract overlapping in the subsequent year or miscellaneous repair maintenance for which bills were received after the closing of the year, therefore, all these expenses were crystallized during the year. Ld. Assessing Officer, however, disallowed the amount of ....
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....dition of Rs. 22,98,510/- on account of prior period expenditure. In the result, ground no.26 of the revenue's appeal is dismissed." 45. Since, similar issue has been allowed by the Tribunal following the ratio and principle laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Modipon Ltd. (supra), therefore, following the same precedence, we allow the claim of the assessee and consequently the Revenue's ground is dismissed." Therefore respectfully following the decision of the coordinate bench in assessee's own case we confirm the order of the learned CIT - A and dismiss ground number 14 of the appeal. 23. Ground number 15 is with respect to the disallowance of capital expenditure of Rs. 71,461,134/-. Both the parties confirm that this issue is covered in favour of the assessee by the order of the coordinate bench for assessment year 2000 809 wherein the coordinate bench followed the decision of the coordinate bench in assessee's own case for assessment year 2006 - 07 and the revenue did not further appeal before the honourable High Court as well as the learned assessing officer himself has not made any disallowances on this issue from asses....
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....d its business and no new asset much less capital asset have been created. The Assessing Officer was not justified in treating these expenses as pre-operative expenses and same is to be capitalized. The question of capitalization does not arise as these expenses were incurred on conducting feasibility and viability study of taking various projects at the stations mentioned above. However, after the feasibility and viability study these places were not found suitable for developing SEZ Projects and same were abandoned. The expenses were incurred for extension of same line business and such expenses have to be allowed as revenue expenditure. Therefore, respectfully following the decisions of jurisdictional High Court and my own order for AY 2007-08 in appellant's own case (Page 222-229), the disallowance of Rs. 1,26,11,958/- made by the Assessing Officer on this account is deleted. " 136. Before us, the learned counsel for the assessee submitted that the disallowance of expenses incurred towards conducting feasibility study, market study and viability report in relation to SEZ projects at various locations like Jaipur, Buvaneshwar, Gandhinagar, Ambala, Ludhiana etc.. The ass....
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....y of various construction projects in which business the assessee is engaged into. Before embarking on to any of the projects, it is a common practice to obtain a feasibility and economic viability of construction projects at different geographical location. These expenses are for facilitating the existing business of the assessee. It is not the case of the revenue that it is altogether a new line of the business or unrelated to the business of the assessee. Therefore, in our view, this expenditure are wholly and exclusively incurred for the purposes of the business of the assessee. Hence, we confirm the order of CIT (A) and delete this ground of revenue's appeal." 138. Since on the similar issue the Tribunal has accepted the assessee's contention, therefore, consistent with the same view, we affirm the order of the ld. CIT (A) and dismissed the Revenue's ground." XXXXX 142. We find that the Tribunal also in Assessment Year 2006-07 has dismissed the Revenue's appeal after observing and holding as under: "216. We have carefully considered the rival contentions. The assessee has incurred this expenditure on proportionate and feasibility of....
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....peated technical consultants globally. The company requires two flights directors, senior executives, ingenious and consultants both on its rolls and hired in India and abroad which various project sites located all over the country. Due to the frequency of such transportation the company deemed it fit to acquire the aircraft and helicopter rather than only hire such services. Therefore the expenditure on maintenance and operation of the helicopter and aircraft and chartering of aircraft and other routine expenditure were expended for the purposes of the business. It was further held by him that assessee is a public limited companies are distinct assessable entity as per the definition of person u/s two (31) of the act therefore it cannot be stated that the expenditure identified as expended by the directors and other employees of the company is personal in nature because of the limited company is an in animated person and there cannot be anything personal about such an entity. He further followed the decision in case of Sayaji Iron and engineering Co Ltd 253 ITR 749 and deleted the addition/disallowance. The learned departmental representative could not show us any reason to st....
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....ourable Supreme Court has observed that while examining the allowability of deduction of the interest the AO is required to consider the genuineness of the business borrowing and that the borrowing was for the purposes of the business and not an illusionary and colourable transaction. Once the genuineness of the borrowing is proved and the interest is paid on the borrowing it is not within the powers of the learned assessing officer disallowed the deduction either on the ground that the rate of interest is unreasonably high of that the assessee had himself charged the lower rate of interest on the money which it has advanced. The learned departmental representative could not controvert the above finding of the learned CIT - A. In view of this, we confirm the order of the learned CIT - capital and dismiss ground number 18 and 19 of the appeal. 27. The ground number 20 of the appeal is with respect to the disallowance of Rs. 24,098,125 on account of non-ending back of the disallowance of the items to the competition of total income. With respect to this the learned CIT - A has directed the learned assessing officer to go through the necessary evidences filed during the assessment ....
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.... the order. In the present case the disallowance confirmed by the learned CIT - A is of Rs. 769,038. We do not find any distinction between the issue before the coordinate bench for assessment year 2008 - 09 and the issue in the impugned appeal. The coordinate bench decided this issue as Under:- "21. Coming to the issue of addition on account on notional rent where security deposits were received but no rental was shown, amounting to Rs. 10,91,270/-. It has been pointed out by both the parties that this issue now stands covered in favour of the assessee by the Tribunal in assessee's own case for the Assessment Year 2007-08 vide order dated 01.11.2017 in ITA No. 3846/D/2012. 22. The addition has been made on the ground that assessee despite being owner of the Kiosks has not disclosed rental income in its books and the same has been transferred to M/s. DLF Services Ltd. by over riding title. M/s. DLF Services Ltd is providing maintenance and upkeep services of the mall including Kiosks. In return for consideration for these services, the appellant vide authority letter dated 12/12/2005 has granted M/s DLF Services Ltd., right to recover the rental receipts from the ....
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....ncome is considered as chargeable to tax in the case of appellant, the appellant may be eligible for claim of expenses on account of maintenance of Mall which was owned and run by the appellant and as such appellant has not derived any tax benefit on the basis of such arrangement and for diversion of lease rent. It is further relevant to take note of the fact that such lease rent has been subjected to tax in case of M/s. DLF Services Ltd. 46. After considering the facts of the case, we are of the view that there is no justification for addition of Rs. 12,60,000/- as same was towards business obligation and for specific services rendered by M/s. DLF Services Ltd. and accordingly the impugned disallowance is directed to be deleted." 24. Thus, following the aforesaid precedence in assessee's own case, we decide this issue in favour of the assessee and the impugned addition is directed to be deleted". Therefore respectfully following the decision of the coordinate bench we allow ground number 2 of the appeal and the direct the learned assessing officer to delete the disallowance of Rs. 759,038/-. 33. Ground number three of the appeal is with respect to the disal....